News Flash

January, 2017

Prospects for the retention and

attraction of investments into the

economy of Ukraine

News Flash I Accace Ukraine I Prospects for the retention and attraction of investments into the economy of Ukraine

Prospects for the retention and attraction of investments into

the economy of Ukraine

Despite the difficult time for the Ukrainian

economy, investors say that Ukraine has not lost

its reputation in their eyes. Yes, we are still

observing a falling economy, political instability

and armed conflict, and as a result is a

significant rate decline in the inflow of foreign

capital investments in our country. However,

according to 2016 statistics, everything is not

lost. So, it totaled $ 2.9 billion for the first half of

2016, according to the State Statistics Service,

the inflow of direct foreign investments in the

Ukrainian economy.

At the same time the pace of capital outflows

gradually reduced. If during the first half of 2015

were seized $ 351 million from Ukraine and

during the I half-year 2016 - $ 330 million. Of

course, we have to fight for the trust of investors,

but capital flow negative trend refracted and

that's a fact. Another question is how to retain

this capital and attract new at the same time an

increase in the rate of growth, because it is a

lifeline for the economy. Despite the numerous

promises of making regulatory and fiscal climate

better, investors do not see real action from the

government.

On the other hand, there are many successful

examples of foreign capital investments in actual

working projects, which generate real cash

inflow for investors.

The most prospective sectors for the

investments

Ukraine is considered as a leader in

investment potential in the agribusiness

sector. The share of agrarians in total exports

exceeds is 40%. For comparison, the share of

exports of steel products is in a half less and

engineering products - three times less. In

addition, because of a permanent global rise of

food prices, agriculture in the extremely

attractive for investment industry. According to

various estimates, Ukraine has from 25 to 30%

of world reserves of black earth. So, it created

the opportunities for growing environmentally

friendly (organic) products, whose worldwide

consumption is growing rapidly. Besides, we

already got the experience in this field. About

400 thousand hectares of Ukrainian land are

certified for organic farming. And the products

grown on these lands are demanded in the

European Union.

Another attractive sector for investors is the

energy sector. On the one hand, it needs a

major upgrade and restructuring. For example,

heating systems and equipment in our country

are worn by 80-85%, electricity - by 45-50%. On

the other hand, rising energy costs and an

increase of the deficit of traditional fuel

resources (such as gas, coal) provide a powerful

impetus for the development of an alternative

technologies, the implementation of energy

efficiency projects. For example, in Western

Europe, the share of alternative energy in the

overall energy balance is 30-40%, in Ukraine - is

only 5-6%. But energy independence and

stability play an important role in the economic

health of the state. Moreover, according to the

estimates of the Cabinet of Ministers, Ukraine in

the foreseeable future can become not only self-

sufficient in energy, but also a major exporter.

For instance, the total gas reserves about 5.6

trillion cubic meters. At current levels of

consumption this amount will be enough for

more than 160 years.

Ukraine is a major transport and transit hub,

connecting Western and Eastern part of

Europe, the Baltic and South-West Asia.

Firstly, our country has a very convenient

access to sea routes (both on land and on

water), which, provide the circulation of traffic

flows from Europe and the CIS to Turkey, the

Middle East and North Africa.

Secondly, the network of Ukrainian railways is

about 22 thousand km, the length of roads - 170

thousand km. This powerful infrastructure

network, which at the proper amount of

investments for its modernization, development

News Flash I Accace Ukraine I Prospects for the retention and attraction of investments into the economy of Ukraine

and maintenance (only for road repairs require

500-600 billion USD) will provide a multiple

increase in traffic. Thirdly, the EU is ready to

contribute to the realization of transit possibilities

of Ukraine. For example, in midsummer, Ukraine

and Hungary have agreed to increase the free

bilateral and transit road transport and for

Ukrainian hauliers additional quotas.

IT-industry is growing in Ukraine

Ukraine has a high potential in the sphere of

high technologies. IT-developments of

Ukrainian origin are worldwide known. During

2015, for example, our IT sector has managed

to attract more than $ 130 million of investments

(in 2014, by comparison, this figure amounted to

$ 39 million), and the volume of export of IT-

services reached $ 2.5 billion, compete on this

indicator with the agribusiness sector and

metallurgy. In total, over 1000 IT-companies and

more than 100 science centers are operated in

Ukraine. Our universities produce 6-7 thousand

professionals annually.

The possibility of IT is far from exhausted.

Calculations show that the capacity of the

industry in Ukraine - from $ 15 billion to $ 30

billion At the same time the full potential of IT-

industry will be able to open only because of one

condition: we will encourage developers to

generate ideas and create products here,

"home" and not seek every opportunity to

develop and resell themselves abroad.

We can use the experience of Israel, which, in

spite of the long war, has managed to become

one of the largest IT-hub of the world and bring

the economy billions of dollars as an investment.

Exports of Israel’s high-tech industry reached

almost $ 38 billion in 2015, and the amount of

capital raised in IT-projects amounted to $ 4.4

billion. The figures speak for themselves.

Despite of the actual problems with the existing

business culture in Ukraine and in order to gain

access to the global resources of investors, a

key priority of the Ukrainian economy is to be

comprehensible for foreign capital and ensure its

appropriate legal protection on the territory of

our country. This will be the key to successfully

attracting not just millions, but billions of dollars

of investment. After all, according to research by

economists, Ukraine in the next 15 years, has a

good chance to get on from $ 120 billion to $

270 billion. If conditions are completed, these

figures will be real.

Disclaimer

Please note that our publications have been prepared for general guidance on the matter and do not represent a

customized professional advice. Furthermore, because the legislation is changing continuously, some of the

information may have been modified after the publication has been released. Accace does not take any responsibility

and is not liable for any potential risks or damages caused by taking actions based on the information provided

herein.

News Flash I Accace Ukraine I Prospects for the retention and attraction of investments into the economy of Ukraine

Contact

Nataliya Tadeyeva

Branch director

E-Mail: Nataliya.Tadeyeva@accace.com

Phone: +380 44 569 33 10

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